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New Securities Law provides framework for virtual assets, supports multiple financing options

New powers: CMA authorised to set up stock exchange for small and medium enterprises
Shaikh Abdullah bin Salim al Salmi, Executive President of the Capital Market Authority (CMA)
Shaikh Abdullah bin Salim al Salmi, Executive President of the Capital Market Authority (CMA)

Shaikh Abdullah bin Salim al Salmi (pictured), Executive President of the Capital Market Authority (CMA), said that the new Securities Law promulgated by Royal Decree 46/2022 which position the capital market sector as an engine of the country’s economic development.

Speaking about the key features of the law, Al Salmi said it will contribute to creating an independent law regulating the securities industry in the Sultanate of Oman, which will be flexible enough to adapt to future trends and developments. It confers upon the Authority adequate powers to strengthen regulation and better develop the sector.

It will contribute to the growth of fintech based services, as the law authorises the Authority to regulate innovative financing, approval of fintech based apps and virtual investments. The law also allows expanding financing options by regulating new products and services such as warehouse receipts, derivatives, futures etc.

Additionally, the Securities Law supports special programmes and initiatives to finance small and medium enterprises, given the economic importance of this type of enterprises, whose financing needs are of a special nature, which addresses one of the most important challenges facing entrepreneurs the owners of small and medium enterprises.

Significantly, it will grant the Muscat Stock Exchange (MSX) complete autonomy from the regulator as a self-regulated institution. The stock exchange will be allowed to regulate brokerage activities, market making and margin financing.

The law also confers on the CMA the powers to licence the establishment of a stock exchange for small and medium enterprises. The articles of the law also focus on achieving the principle of fairness and protection for the participants in the capital market in the Sultanate of Oman by putting in place many global practices, including those issued by the International Organization of Securities Commissions (IOSCO). The law also provides the necessary legislative cover to address the shortcomings in the rating report prepared by Thomas Moore on Muscat Clearing and Depository Company, which will enhance the rating of the company to higher levels that will enhance its position among its peers.

Article 9 of the Law, which obligates the CMA, while exercising its powers, to encourage competition and innovation in services and products provided by the entities subject to the provisions of the law, to facilitate equal access to customers, and to work to determine the costs that the CMA imposes on the entities subject to the provisions of this law, commensurate with the advantages of the consumers, in addition to ensuring striking balance between the interests of the regulated entities and the interests of the consumers.

Al Salmi pointed out that the law addresses an important matter that will contribute to the development of the capital market, which is to encourage the establishment of independent institutions that engage in investment banking activities, concerned with providing advisory services related to financing options, acquisitions, control and other services.

The law empowers the CMA to establish a consumer protection fund to compensate the consumers in the event of losses to their assets held with the firm. Al Salmi explained that the fund does not cover losses resulting from a change in the nominal value or entering into inappropriate investments or distress of the issuer of the security, and it does not cover losses related to the assets that consumers lent or provided as guarantee to an entity operating in the field of securities under an agreement between them.

In the context of strengthening the investor protection system, the law gives clients who lost their assets with any of the licensed entities under liquidation the priority over creditors. Article (52) provides that the CMA must appoint a liquidator if it is evident that any of the members of the Consumer Protection Fund has declared bankruptcy. Where the assets of clients are unspecified they must be distributed on pro rata basis and the clients who lost their assets with the licensed entity shall have priority over the creditors.

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